Economic Inequality in Australia since the 1970s - Report Example

Economic Inequality in Australia Since 1970’s Name Professor Institution Date Why economic inequality has increased in Australia since the 1970's Economic commentators and Policy makers have in the last two decades persuading Australians into acknowledging that their country forms part of the world economy hence every issue affecting global economy affects Australia (Conley, 2004). The truth is that since the country adopted trade liberalization in 1970s, it has achieved a tremendous growth. John Howard contends that the economy of Australian have expanded for 14 years straight; an outstanding success by every standard (Conley, 2004). However, the growth has been met with dissimilar social analysis with regard to social life of Australians. The truth is that, even as the economy grows, Australia has witnessed an ever increasing economic inequality since the 1970's. According to Gaston & Rajaguru (2009, p.87), some experts have argued that an increase in economic inequality is often as a result of economic growth. This insinuation has been disapproved for lack of efficient evidence. They argue that everybody is better off, but some individuals are better off compared to others. Therefore, this essay will evaluate why economic inequality has increased in Australia since the 1970s. Also, the essay will discuss the consequences of the increase of economic inequality in Australia. Some of the cause to be discussed includes Inadequate and inequitable taxation, increasing globalization and unemployment. Whiteford (2013) defined Economic inequality as the situation where income, assets and wealth are unevenly distributed among the population in a country and sometimes among nations. In this case of Australia it is among individuals. Sometimes, it is simply defined as the gap between the rich and the poor or wealth disparity (Wilkins, 2014, p.69). The economic inequality challenge can involve concepts of equity, equality of opportunity and equality of outcome. For the better part of the previous century, Australia spends supporting egalitarianism. However, just after half-century following World War 1, the incomes increased rapidly, mostly at the bottom of distribution compared to the top. This happened in the years of 1970s. Nevertheless, the mid-70s, saw full time incomes for bottom tenth stagnant 15%, whilst full time incomes for the leading tenth growing by 59% (Conley, 2004). The Australian government has ensured that their tax structures are not as they used to be hence making it excessively good to the rich. They have done that through the decrease in taxation of capital gains and superannuation, firms and individuals. Australian Bureau of Statistics (2013) claims that in the previous 8 years, there has been reduction of tax of about $170 billion, In the top ten income earners, they get 42 per cent tax cut which amounts to $73 billion) than the bottom who gets 80% (Douglas et al 2014). Another relevant benefit for the wealthy is the negativity of property investment by the landlords. The changes in the net system have brought in decrease in revenues of the government and also increase inequalities. For instance, individuals who are from the age of 60 and above do not pay taxes (Douglas et al 2014) Also, superannuation contributions and earnings pay little taxes. Douglas et al (2014) argue that in a few years to come the Australian government will have to pay extra more taxes for the pensioned individuals and this is because of the superannuation tax concessions which are worth as much as $36 billion a year. Here is an example of inequality of the current tax system which is that of an individual who might be 65 years and above ended up getting a good amount of income from his or her superannuation funds and ends up paying no tax (Stiglitz, 2012). In order for the government to provide chances of replacing ineffective taxes with more effective taxes, goods and services are also being taxed and there is the compensation of payments when transferring payments that are used for offsetting increased inequality that contributes to the regressive nature of the tax. Whiteford (2014) contends that if the Australian government wants to regain its revenues, it is important for them to tax the growing services sector of the economy. Therefore, it will be appropriate for the government to set up measures within the tax system and procedures which will ensure that there is no space between the fortunate and the less fortunate, but it has not been implemented yet. In the years 1983-84 the top tax rates were 62 cents dollars but in the current days it has been reduced to 48 cents per dollar (Douglas et al 2014). The government’s superannuation or Personal income is taxed at 30 and 16% respectively (Gaston & Rajaguru, 2009). Globalization is normally linked with rise of inequality in developed nations. Supporters of this claim that the globalization is an indicator of continuously changing world markets in which the previous objective of the governments to reallocate fairly the benefits of growth and development is no advantageous (Gaston & Rajaguru, 2009, p.97). Instead, attaining expansion into a globalised market implies governments have to mediate less in market practices. In numerous cases, globalization is often characterized by an increase in trade, increase in immigration and displacement of workers by foreign investment in developed countries. The argument is that this displacement showed itself by means of unemployment and deindustrialization as the low-skill well-paid and manufacturing jobs dropped in Australia since 1970s (Dawkins, Gregg & Scutella, 2005, p. 397). In nutshell, globalization has reportedly decreased employment in manufacturing industries, hence indirectly resulting to earnings inequality. Through this perspective, numerous expensive domestic employees have been displaced by cheap foreign labor in Australia over the years. Benach & Muntaner (2007, p.276) maintained that the rising number of immigrants mostly from Britain, Wales and Scotland in Australia has increased the number of low-paid employees, which raises the bottom of the income distribution while weakening people in the middle. Also, a multinational corporation buys a stake in a local company, lower salary jobs emerges as jobs are eradicated to decrease the redundancies in the organization. Arthur & Nielsen (2002) established that foreign corporations, different from domestic companies, considerably raise the implementation of the downsizing programs which are frequently employed to lay-off high-salaried employees. Additionally, the trade liberation adopted in the 1970s by the Australian government has led to increase of imports while reducing domestic manufacturing. Atkinson & Leigh (2007) posit that this process has eroded the well-paying jobs and pushed these employees downwards to low-paying unstable jobs. When low-priced foreign manufacturing scrambles for a market and is exchanged for domestic labor, the earnings inequality increases as evidenced in Australia (Whiteford, 2013). Such situations have been witnessed in an Australian Apparel sector where foreign products have overtaken local ones. Unemployment is cited as one of the causes of inequality in Australian since 1970s. The job market has worsened from the 70’s onwards. The system that was highly adopted in this country highly inclined towards male full-time employment. This made 60 % jobs to be accumulated by only men in the late 70’s. Austen & Redmond (2008) claim that Women working on full-time jobs were only represented by 15% while the next 15% was resented part-times employment which majority was taken up by women. In the 1980s, the percentages had dropped due to recession but again improved in the 1990 when it went back to 60% (Australian Institute of Health and Welfare 2005).. The percentage demonstrated here are some of them signs that economic inequality between men and women is still a major concern in Australia. Australian Institute of Health and Welfare (2005) continued to state men in workforce have also been reduced to economic recession of 1990s and global economic crisis of 2008. Employment is predicted to increase inequality in Australia as foreign companies increase foreign labor while other roles are taken up by technology. The consequences of inequality increase for life in Australia Income has been regarded as the major determinant of living condition of human beings. Therefore security of that income is very critical for social and economic welfare like efficient self-worth, health, education and purchasing power (Denniss & Baker 2012). The great rates of economic inequality mainly in terms of incomes have been portrayed to raise class barriers between individuals, decreasing empathy and raising the sense of social exclusion, stress and insecurity. The general result is that society remains more fragmented. Whiteford (2014) pined that High economic inequality normally results to uneven access to quality healthcare, education, housing and nutritious food. Economic inequality pushes people low-income group. The situation make hard for such group afford adequate income to live in a conducive and decent neighborhoods in Australia with facilities like green space, safe environment and reliable transport (Benach & Muntaner, 2007, p.277). Inequality can condemn people mental health risks and psychological torture. Economic inequality leads to decline in performance in schools owing to its segregating impacts. Research demonstrates that the schools attended by children normally rely on the inspiration and interest of peers such as the quality of teachers among others (Maslen, 2014). However, in Australia, economic inequality has segregated schools attended by the rich and that of the poor. Maslen (2014) argue that less economically stable people take their children less performing and low quality school. Such children are disadvantaged and are likely to achieve their aspirations. Quality of healthcare is highly related to economic stability. However, economic inequality remains a stabling block to receiving proper treatments as seen with many Australians (Marmot, 2004). The reality is people who are not of proper health cannot work to their full potential. Therefore, economic inequality has resulted to stress, depression and other diseases in Australia due to lack of enough income to spend of treatment (Marmot, 2004). Conclusion In conclusion, Australian challenges with economic inequality trends depict complex patterns which started way back in the 1970s. The complexity in this issue is that some of the causal factors for economic inequality are actually the one which has led to economic growth of Australia. Globalization is one of the factors which have highly contributed to economic growth of Australia through opening of trade and even advancement of technology. However, it has also led to loss of highly-paying jobs. The claim of several business analysts and policy-makers has been that liberalized economies like Australia is bound to fail if caution. The argument has been made at the expense of other casual factors like unemployment and Inadequate and inequitable taxation. The government of Australia must understand that some of its inefficient decisions have led to more inequality than any other reason and the consequences are strong. If stringent measures are not taken, the gap between could be great and a large population is likely not to receive proper education, get good healthcare and even proper housing. References Atkinson, A., & Leigh, A. (2007). The distribution of top incomes in Australia. Economic Record, 83(262), 247-261. Arthur S.A.,& Nielsen, F. (2002). Globalization and the Great U-Turn: Income Inequality Trends in 16 OECD Countries. American Journal of Sociology, 107(5), p. 34-56. Austen, S., & Redmond, G. (2008). ‘Women’s Incomes’ in Australian Bureau of Statistics (ABS). 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Advance Australia Fair? What to do about growing inequality in Australia. Australia21. Gaston, N., & Rajaguru, G. (2009). Has globalization increased Australian inequality? In J. Corbett, A. Daly, H. Matsushige & D. Taylor (Eds.), Laggards and leaders in labour market reform: Comparing Japan and Australia (pp. 85-108). Routledge: London. Marmot, M. (2004). The status syndrome. How social standing affects our health and longevity. Holt. Maslen, G. (2014). Family Background no guarantee of academic excellence, study finds. Sydney Morning Herald. Retrieved on 25th January 2015 from http://www.smh.com.au/national/education/family-background-no-guarantee-of-a cademic-excellence-study-finds-20140228-33q2q.html#ixzz2wlQaKiSo Stiglitz, J. (2012). The price of inequality: How today’s divided society endangers our future. London: Penguin Books. Whiteford, P.(2014). Income and wealth inequality; how is Australia faring? The Conversation. Retrieved on 25th January 2015 from http://theconversation.com/income-and-wealth-inequality-how-is-australia-faring-23483 Whiteford, P. (2013). Australia: inequality and prosperity and their impacts in a radical welfare Estate. The Australian National University. Wilkins, R. (2014). Evaluating the evidence on Income Inequality in Australia in the 2000’s. The Economic Record, 90 (288), 63-89. Read More